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November 30, 2006. Call in at 12:55 p.m. Eastern Time
TeleconferenceThe Spend Management Market — How Big, Where Is It Growing, Who Are the Market Leaders Andrew Bartels
Vice President
Forrester Research
2Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Agenda
• Spend management market — what it is
• Size and key trends for overall spend management market
• Demand side indicators — who is buying?
• eProcurement — Size, trends, leading vendors
• eSourcing — Size, trends, leading vendors
• Spend analysis — Size, trends, leading vendors
• Contract life-cycle management — Size, trends, leading vendors
• EIPP — Size, trends, leading vendors
• Supplier networks — Size, trends, leading vendors
• Services procurement and procurement BPO
• Recommendations
3Entire contents © 2006 Forrester Research, Inc. All rights reserved.
The spend management market includes software that supports the eight-stage ePurchasing process
1. Spendanalysis
3. Supplieridentification
4. Sourcing
5. Contractmanagement
6. Procurement
7. Orderfulfillment
8. Invoicing, reconciliation, and payment
2. Supplierassessment
4Entire contents © 2006 Forrester Research, Inc. All rights reserved.
US$ millions
Source: Forrester Research, Inc.
$888 $975 $970 $1,059 $1,103 $1,160
$629 $585 $548$591 $626 $679
$149 $196 $225$302
$389$501
$72$73 $100
$110$143
$182
$90$126 $154
$208
$269
$321
$42$62 $88
$109
$130
$155
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2003 2004 2005 2006F 2007F 2008F
Suppliernetwork
EIPP
Spend analysis
Contractmanagement
eSourcing
eProcurement
$1,887$2,059
$2,170
$2,465
$2,660
$2,999
Spend management revenues on rise, with eProcurement and eSourcing still dominating
Base: 60 vendors(numbers are rounded)
5Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Subscription and maintenance revenues outpacing license and services
$612 $630 $613 $684 $732 $797
$374 $433 $464$517 $569
$626$280$367 $437
$544$672
$790
$620$631
$657
$719
$687
$786
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2003 2004 2005 2006F 2007F 2008F
Consulting andintegrationservices
Maintenance
Subscription
License
US$ millions
$1,887$2,059 $2,170
$2,465$2,660
$2,999
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
6Entire contents © 2006 Forrester Research, Inc. All rights reserved.
eProcurement and eSourcing adoption most advanced
5.8
6.8 7.17.7
1.72.1 2.4
2.9
0.81.1
1.61.9
0.5 0.71.1
1.6
0.2 0.3 0.3 0.40
1
2
3
4
5
6
7
8
9
2003 2004 2005 2006F
eProcurement
eSourcing
Contractmanagement
EIPP
Spendanalysis
Number of clients(thousands)
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
7Entire contents © 2006 Forrester Research, Inc. All rights reserved.
EIPP and contract management growing fastest
10%
5%
2%
27%
21%
29%
30%
Total
eProcurement
eSourcing
Contract management
Spend analysis
EIPP
Supplier network
Compound annual growth rate, 2003-2008
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
8Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Software as a service most popular for EIPP, supplier network, and spend analysis
22%
14%
24%
6%
22%
60%
Total
eProcurement
eSourcing
Contract management
Spend analysis
EIPP
Subscriptions revenue as percentage of total revenues, 2006
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
9Entire contents © 2006 Forrester Research, Inc. All rights reserved.
North American demand strongest at Global 2000
2% 2% 0% 1% 7% 3%
61% 58%48%
23%29% 36%
21%16%
20%
38%26%
12%
4%5%
4%6% 5%
5%
9%16%
22% 22% 25%34%
3% 4% 7% 10% 9% 11%
Small (5 to99
employees)
Medium(100 to 499employees)
Medium-large (500 to
999employees)
Large (1,000to 4,999
employees)
Very large(5,000 to19,999
employees)
Global 2000(20,000 or
moreemployees)
Major upgrade
Minor upgrade
First-time purchase
Using, but not purchasingor upgrading in 2007
Not using
Don't know
“Will your company purchase any procurement or sourcing software in 2007?”
N = 204 N =206 N=143 N = 240 N = 130 N= 101
Source: Forrester Business Technographics® September 2006 North American And European SMB Software Survey
10Entire contents © 2006 Forrester Research, Inc. All rights reserved.
European demand strongest at medium-large and large companies
0% 0% 5% 4% 9%
48% 41%30% 26% 26%
33%
19%25%
22%28% 35%
23%
7% 6%19% 7%
5% 7%
15% 18% 19% 23% 21% 21%
12% 10% 11% 10% 9% 7%
0%Small (5 to
99employees)
Medium(100 to 499employees)
Medium-large (500 to
999employees)
Large (1,000to 4,999
employees)
Very large(5,000 to19,999
employees)
Global 2000(20,000 or
moreemployees)
Major upgrade
Minor upgrade
First-time purchase
Using, but not purchasingor upgrading in 2007
Not using
Don't know
“Will your company purchase any procurement or sourcing software in 2007?”
N = 75 N =80 N=64 N = 96 N= 57 N= 43
Source: Forrester Business Technographics® September 2006 North American And European SMB Software Survey
11Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Manufacturers will be biggest buyers in 2007
4% 1% 6% 0%14%
2% 2%
32% 35% 23% 31%
29%
21% 23%
23% 28%31% 28%
17%35% 40%
5%6% 6% 8% 7% 7% 5%
25% 21% 29% 28% 21% 28% 17%
12% 9% 5% 6% 12% 6% 14%
Ma
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Fin
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& i
ns
ura
nc
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Pu
bli
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ec
tor
Major upgrade
Minor upgrade
First-time purchase
Using, but not purchasingin 2007
Not using
Don't know
“Will your company purchase any procurement or sourcing software in 2007?”
N = 198 N = 80 N = 118 N = 36 N = 42 N = 82 N = 111
Source: Forrester Business Technographics® September 2006 North American And European SMB Software Survey
12Entire contents © 2006 Forrester Research, Inc. All rights reserved.
eProcurement/eSourcing market consolidating
37
22
44 4244
4852
55
0%
10%
20%
30%
40%
50%
60%
70%
1999 2000 2001 2002 2003 2004 2005 2006
0
10
20
30
40
50
60
Share of SAPand Oracle(w/PeopleSoft)
Share of othertop 10 vendors
Number ofvendors
Percentageshare of market
Number of vendors
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
© 2006, Forrester Research, Inc. Reproduction Prohibited
The Forrester Wave™: eProcurement
Risky StrongBets Contenders Performers Leaders Other vendors
not included:• BasWare• ePlus• MRO Software• Proactis (UK)• SciQuest• Lawson, Infor,
other ERP• eMarkets such as:
• Agentrics• cc-hubwoo• IBX• QuadremUpdate coming
in Q1 2007
January 4, 2005, Tech Choices “Forrester Wave™: eProcurement, Q4 2004”
14Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Largest eProcurement vendors
Vendor Estimated number of
clients, 2006
Comments
SAP* 2,500 Largest vendor, almost all licensed
Oracle with PeopleSoft* 2,400 Mostly licensed, some licensed under Oracle OnDemand model
Ariba 250 Fortune 500 clients, not much growth
ePlus 450 US only; linked to IT product sales
BasWare 80-90 Nordic countries; licensed product
Perfect 80-90 US mostly; SaaS offering
IBX 80-90 Nordic countries; SaaS offering
CC-Hubwoo 60-70 Germany and France; SaaS
Quadrem 30-40 Mining and CPG companies; SaaS
Ketera 25-30 US; SaaS
Source: Forrester Research, Inc., based on vendor data from over 60 vendors
15Entire contents © 2006 Forrester Research, Inc. All rights reserved.
eProcurement market inches toward $1 billionUS$ millions
$348 $356 $326 $368
$238 $263 $262$279
$65$99 $121
$150$238
$258 $262$262
$0
$200
$400
$600
$800
$1,000
$1,200
2003 2004 2005 2006F
Service revenues
Subscriptionsrevenues
Maintenance
License revenues
$972 $970$1,059
$888
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
© 2006, Forrester Research, Inc. Reproduction Prohibited
The Forrester Wave™: eSourcing Suites
Others vendors not included:
• I-Faber• Bravo Solutions• Intesource
eMarkets such as:• Agentrics• Quadrem• IBX
Changes to market: • SAP acquired Frictionless• IBX acquired Portum• Emptoris acquired Mindflow
November 17, 2005, Tech Choices “The Forrester Wave™: eSourcing Suites, Q4 2005”
17Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Largest sourcing vendors
Vendor Estimated number of clients, 2006
Comments
Ariba 300+ Pushing on-demand
Procuri 150 Pure SaaS; reseller partnership withCC-Hubwoo
Emptoris 150 Strong growth, acquirer
I-Faber 150 SaaS, Italy, and Germany
Oracle/PeopleSoft 140 Slow uptake in install base
SAP with Frictionless
160 (120 + 40) Frictionless acquisition fills hole
UGS 80 Linking to PLM
Iasta 70 Low-cost SaaS; partner with Ketera
Global eProcure 60 SaaS vendor; growing
Perfect Commerce 60 SaaS vendor
IBX with Portum 60 Acquired Portum
Synertrade 50 Licensed; France and Germany
VerticalNet 50 On the block
Source: Forrester Research, Inc., based on vendor data from over 60 vendors
18Entire contents © 2006 Forrester Research, Inc. All rights reserved.
eSourcing market shifts away from services
$150 $144 $134 $150
$84 $97 $106$121
$130 $140 $137$143
$265 $204$171
$178
$0
$100
$200
$300
$400
$500
$600
$700
2003 2004 2005 2006F
Service revenues
Subscriptions revenues
Maintenance
License revenues
US$ millions
$585$548
$591$629
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
19Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Spend analysis vendors
Vendor eSourcing Wave
Emptoris 5.0
Verticalnet 4.5
Ariba 4.3
Perfect Commerce 4.0
Frictionless Commerce 3.8
Procuri 3.6
Global eProcure 3.6
SynerTrade 3.3
• Other vendors with competitive offerings:
» Zycus
» Ketera
» CGI Silver Oak
» SAS
• Changes to market:
» Procuri acquires TrueSource
Source: November 17, 2005, Tech Choices “The Forrester Wave™: eSourcing Suites, Q4 2005”
Wave coming in Q2 2007
20Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Spend analysis market shifts to software as a service
$30 $25$32 $27
$14$17
$22$22
$5 $10
$18 $25$23 $20
$28$37
$0
$20
$40
$60
$80
$100
$120
2003 2004 2005 2006
Service revenues
Subscriptions revenues
Maintenance
License revenues
US$ millions
$73
$100
$110
$72
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
21Entire contents © 2006 Forrester Research, Inc. All rights reserved.
EIPP and CLM markets still fragmented, and dominated by specialists
24
8 8
25
2120
1716
0%
10%
20%
30%
40%
50%
60%
70%
1999 2000 2001 2002 2003 2004 2005 2006
0
5
10
15
20
25
30
Share of SAPand Oracle(w/PeopleSoft)
Share of othertop 10 vendors
Number ofvendors
Percentageshare of market
Number of vendors
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
© 2006, Forrester Research, Inc. Reproduction Prohibited
Vendors with contract management specifically for purchasing contracts:
– Perfect– Frictionless (acquired by
SAP)Changes to market:
– Emptoris acquired diCarta– OpenText acquired
Hummingbird
The Forrester Wave™: Contract Life-cycle ManagementSeptember 2006, Best Practices “How To Drive Document Management Adoption”
23Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Largest CLM vendorsVendor Estimated number of
clients, 2006Comments
Accruent 350 Real estate contracts
I-Many 280 Mix of buy-side revenue management contracts and all contracts
Oracle 500 Mostly for services contract; about 80 buy-side
Procuri 150 Acquired CMSI
Ariba 120 Pushing into SaaS
Upside 85 .Net based; licensed and SaaS
Emptoris 60 Acquired diCarta; licensed, growing
Nextance 50 Licensed product; growing
Open Text 30 Licensed product; acquired Hummingbird
Selectica 25 SaaS; acquired Determine
Source: Forrester Research, Inc., based on vendor data from over 60 vendors
24Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Contract life-cycle market booms
$81 $95 $107$133
$39$54
$72
$107
$9$8
$7
$19
$59
$82
$86
$131
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
2003 2004 2005 2006
Service revenues
Subscriptions revenues
Maintenance
License revenues
US$ millions
$238$272
$388
$187
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
25Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Buy-side contract life-cycle management still dominates
$64 $77 $89 $108$28
$40$56
$74
$9$8
$7
$19
$48
$70$74
$102
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
2003 2004 2005 2006
Service revenues
Subscriptions revenues
Maintenance
License revenues
US$ millions
$196$225
$302
$149
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
© 2006, Forrester Research, Inc. Reproduction Prohibited
Forrester Wave™: Accounts Payable EIPP
August 2005, Tech Choices “Accounts Payable EIPP, Q3 2005”
Other vendorsnot included:• Harbor
Payments• Perfect
Commerce• Bottomline• 170 Systems• Dozens of small
vendors
27Entire contents © 2006 Forrester Research, Inc. All rights reserved.
EIPP market dominated by software as a service
$19 $24 $28 $32$10
$14 $17 $22$47
$67$86
$125
$15
$20
$22
$29
$0
$50
$100
$150
$200
$250
2003 2004 2005 2006
Service revenues
Subscriptions revenues
Maintenance
License revenues
US$ millions
$126
$154
$208
$90
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
28Entire contents © 2006 Forrester Research, Inc. All rights reserved.
The logic of eMarkets and supplier networks
Buyer #1
Buyer #2
Buyer #1
Buyer #NBuyer
#2
Buyer #N
vs.
29Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Primarilycollaborative
Primarilytransactional
Mixedcollaborative/transactional
Pre-launch
Lift-off
Escapevelocity
InOrbit
Approachingorbit
Transora
ChemConnect/Envera
CovisintPantellos
Enporion
e2Open
Cordiem
OmnexusExostar
TradeRanger
Converge
ForestExpress
RubberNetwork
WWRE
GNX
CPGMarket
Over $100 billion
in transactions/
year
Over $1 billion in
transactions/year
Over $100 million in
transactions/year
Over $10 million in
transactions/year
Elemica
SupplyOn
Transplace
RMX
GHX
Quadrem
Novopoint
Asite
FSMx
Under $10 million in
transactions/year
Rating the Consortia E-Markets, 2001
What happened to eMarkets?
$
$
$
$
RIP
RIP
RIP
RIP
RIPRIP
RIP
RIP
Agentrics
Agentrics
1SYNC1SYNC
ConvergeConverge
30Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Leading supplier networks
Provider Number of suppliers
Number of customized catalog
suppliers
2005 PO volume
(millions)
2005 PO value
(billions)
Ariba 132,000 25,000 76.0 $75.0
Perfect 11,500 2,500 7.0 $3.9
Quadrem 46,500 400 5.4* $12.5*
CC-Hubwoo 12,000 1,800 1.0 € 5.0
IBX Nordic 10,000 1,200 1.2 € 3.5
Source: Forrester Research, Inc., based on provider Web sites and briefings
* YTD 2006 annualized
31Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Supplier network services all subscription and services
$0 $0 $0 $0$0 $0 $0 $0
$25
$44
$69$83
$17
$17
$19
$26
$0
$20
$40
$60
$80
$100
$120
2003 2004 2005 2006
Service revenues
Subscriptions revenues
Maintenance
License revenues
US$ millions
$62
$88
$109
$42
Source: Forrester Research, Inc.
Base: 60 vendors(numbers are rounded)
32Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Services procurement vendors
Other vendors with
competitive offerings:
» IQ Navigator
» Fieldglass
» Rearden Commerce
Wave coming in Q1 2007
Vendor eSourcing Wave Rating
Ariba 5.0
PeopleSoft 4.1
Oracle 4.0
Ketera Technologies 3.1
SAP 2.8
Perfect Commerce na
33Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Suites and BPO
• Supplier relationship management or spend management suites
» Ariba
» Oracle/PeopleSoft
» SAP
» Perfect Commerce
» Ketera
• BPO
» Accenture
» Ariba
» HP Services
» IBM Global Services
» ICG Commerce
Wave coming in Q2 2007
34Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Recommendations for IT buyers
• For buyers of spend management solutions
» Look separately at procurement/EIPP vs. eSourcing/spend analysis vs. contract management
» SAP and Oracle still have holes and weak points in their offerings — you still need specialists
» Expect new entrants and consolidation in EIPP and contract management
» Prices declining for eProcurement and eSourcing as products get commoditized
» Determine where to use licensed solutions and where to use software as a service solutions — both are available in all categories
35Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Recommendations for IT vendors
• For vendors of spend management solutions
» Demand is growing but unevenly — pick your segments
» SAP and Oracle are not dominant yet
» Global 2000 enterprises are not as saturated as it had seemed!
» Expect new entrants from enterprise content management into contract management market
» Understand where demand for SaaS is strong (eSourcing, spend analysis, EIPP), and where it is not (eProcurement, contract management)
36Entire contents © 2006 Forrester Research, Inc. All rights reserved.
Andrew Bartels
(516) 869-0128
abartels@forrester.com
www.forrester.com
Thank you
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